Congress OKs $1.9 trillion boost in debt limit

By Jeanne Sahadi, senior writer


NEW YORK (CNNMoney.com) -- The House on Thursday approved a record $1.9 trillion increase in the cap on how much the government can borrow.

The House also approved a measure that imposes tougher budget rules on lawmakers.

The votes, which broke down largely along party lines, come one week after the Senate approved both measures.

The legislation, which is expected to be signed by President Obama, will raise the debt ceiling to $14.294 trillion.

The debt limit hike is expected to cover the Treasury's borrowing needs past the November mid-term elections and into 2011. That means lawmakers up for re-election won't need to take another politically sensitive vote before the polls open.

If the ceiling were ever breached, the country would effectively be in default. That would slam bonds, the dollar and creditors' portfolios.

As of Wednesday, debt accrued to date was $12.304 trillion, or roughly $90 billion shy of the $12.394 trillion statutory limit currently in place.

Tougher budget rules on tap

Voting to increase an already record-high debt limit was anathema to the fiscal conservatives in the House known as the Blue Dogs. They have been pushing for stricter "pay as you go" budget rules that would curb lawmakers' ability to run the debt up in the future.

To smooth passage Thursday, House leaders used a procedural strategy to allow the Blue Dogs to vote against the debt ceiling hike but for the pay-go legislation.

The pay-go rules would require lawmakers to find ways to pay for proposed spending increases in entitlement programs or for any tax cuts by offsetting them with higher taxes or reduced spending elsewhere in the budget.

Funding for entitlement programs -- such as Medicare and Social Security -- is considered mandatory spending and not subject to annual review by legislators.

"Today will help usher out an era of irresponsibility and begin putting the country back on a fiscally sustainable path," Obama said after the vote.

Pay-go doesn't reduce the debt already accrued, but it would put the brake on future increases -- a helpful first step, budget experts say.

The effectiveness of pay-go, however, depends on its parameters. The strongest form would not allow any policy to be exempt.

However, the pay-go measure that the House and Senate have now passed exempts some expensive measures, such as the cost of a permanent extension of middle class tax cuts. It would also exempt the Medicare "doctor fix" for 5 years and the extensions of relief from the Alternative Minimum Tax and the estate tax for two years.

Supporters of pay-go often credit the policy with helping the Clinton administration create an annual budget surplus after combating the country's annual deficits in the 1990s. But the pay-go law in place at the time did not exempt any expensive policies, said budget expert Charles Konigsberg, author of the book "America's Priorities."

-- CNN congressional producer Deirdre Walsh contributed to this report. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 10:22pm ET
Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29

Sections

Union organizers say that fast food workers will strike in more than 150 cities on Thursday. Workers want a $15 minimum wage and protection from retaliation by employers. More

Gas prices are falling to nearly $3 a gallon in some parts of South Carolina, and that will soon be common in much of the country. More

Celebrities' nude photos continue to get leaked on the Internet because of bad passwords and scams. More

The Coolest Cooler is the most successful Kickstarter campaign in the site's history, raising $13.3 million from over 62,000 backers. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.